Kirch
Gruppe, the German media group, plans to improve the terms of its rescue
attempt of EM.TV, its debt-ridden rival, as it seeks to ward off counter-offers
by other investors.

Disney
is understood to be keeping the situation at EM.TV under review, as the
US entertainment giant harbours a long-term interest in the Jim Henson
Company, creator of the Muppets, owned by EM.TV.

Executives
at Disney's headquarters in Burbank, California, are said to be interested
in an opportunity to buy the Henson business if a deal between Kirch and
EM.TV collapses.

Michael Eisner,
the Disney chairman and chief executive, failed to secure the purchase
of the Muppets business several years ago and company executives are exploring
whether the business might come available for acquisition at a reasonable
price.

News that
Disney is following the negotiations adds to the list of parties that
have expressed interest in EM.TV's assets.

The FT has
learned that Kirch will this week offer to exercise an option held by
EM.TV to buy 25 per cent of SLEC, the foundation that manages the rights
to Formula One motor racing events, from owner Bernie Ecclestone.

Last February,
EM.TV acquired 50 per cent of SLEC for Dollars 712.5m in cash and 12.58m
shares. Under the terms of the deal, it has an option to buy another 25
per cent for close to Dollars 1bn until the end of February. If the option
is not exercised, Mr Ecclestone could force EM.TV to buy the stake from
May. Details of Mr Ecclestone's "put" option were revealed in
December, precipitating a steep fall in EM.TV's share price as it emerged
that the heavily indebted group, following a string of acquisitions, would
be unable to raise the Dollars 1bn needed.

Last
month, Kirch and EM.TV unveiled the provisional terms of a rescue attempt
that would see Kirch acquire half of EM.TV's stake in SLEC and a 25 per
cent voting right in the group in exchange for its share in a children's
programme joint venture and Dollars 550m in cash.

The relationship
between the two has deteriorated since it emerged that investors, including
Hellman & Friedman, a US private equity house, were preparing a counter-bid
for EM.TV's stake in SLEC. EM.TV is barred from approaching other suitors
until an exclusivity period with Kirch expires on Wednesday.

Under the
revised Kirch offer, to be submitted to EM.TV's supervisory board and
to Mr Ecclestone early this week, EM.TV would hand its call option to
Kirch.

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